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N.B. Above Chart is abstracted from
NextView Program
Last week we said that, "Well the mood had swinged greatly
over the past two weeks, from people believed there was going to have a big
correction to the current stage that a bull should continue to charge
further, with a possible of another great Bull run emerged! The mood swing
is certainly incredible and many analysts have been forced to switch their
bear market view into a bull market. As for us, we remain unchanged in our
view, and that we believe the current rally is still a Bear market rally.
The question is, will this be the last rally for this counter trend move OR
it is just wave A of the bear market rally, of which it will have a pull
back before a final wave C rally to carry DJIA into the 10000 level! I am
more incline to the second view. So, if my view is correct, then we would
likely experiencing a pull back correction pretty soon! Since March 8, DJIA
has been experiencing 8 weeks or rally out of the past 9 weeks, the market
is certainly very overbought and should be having a correction any moment.
However, as we had said before, there are about 11 type of correction
patterns and it is very difficult to pin point to the exact correction
formation until it had happened. As such, we have no clue when the market is
going to correct, for the market has not given us a concrete action. At this
moment, what I can say is, if DJIA and S&P both break below 8350 and 898, a
bigger correction should be coming." Indeed we were right to the dot! Both
DJIA and S&P had broken their support at 8350 and 898 last Wednesday,
pointing to a possible of starting a bigger degree correction. We also said
that, "As for STI it has broken its long
term down trend line resistance at 2230 and continued to charge up last
week. The key question is whether STI could continue to stay above the 2230
next week. Failing which, it may be an indication that a bigger degree
correction is on the way." Again we were right, STI had finally given way
and stayed below 2230 for the most part of last week. So, has the long await
correction started? If so, how far the correction can go? If not, was last
week a mere pull back before another impulsive surge coming?
Well, let's look at the rally since
8th March. Both DJIA and S&P have 8 weeks of positive close as compared to 2
weeks of negative close. The negative close on this week seems more
convincing than the previous negative close (three weeks ago), for it was
closed at the lowest point for the week! This week close was also just below
the up trend line that starting from 8th March, which is another significant
evidence on the market weakness. Having said that, market is rather oversold
short term, as such a sudden rally will not be surprised to us. Next week we
will have very light economic data and corporate results to be announced,
couple with a public holiday coming on the next Monday, we could expect
market to turn quite by end of the week. As such, my guess is market may
have some rebound in early part of the week, but will drift lower towards
end of the week. Indeed, any rebound could be a good chance for you to exit
your long position, for a bigger degree sell down if not been started, may
start any moment! If the market is working in according to our expectation,
we believe after a short rebound in the early part of the week, we may
encounter a fierce sell down by end of the week, if not by early part of
next week. As for STI it had failed to stay above its support at
2230,signaling more weakness ahead. If STI breaks below 2100, it is likely
continue drifting lower towards the next major support at 1960. A correction
is much overdue since 8th March, and it is increasing likely to happen soon. As such, we remain cautious short term but feel
that after a big correction, STI should be able to continue climbing up into
higher level. For mid term
customers who had followed my email advise to purchase on 3rd March, and
subsequently added some stocks on 6th April, you should consider taking
profit and stay sideline now. As for short term investor, you may
start looking into opportunity to short the market using CFD or SBL account.
The following are the support and
resistance to watch for Dow Jones, Hang Seng and Nikkei next week.
Dow Jones Hang Seng
Nikkei
Resistance 8350
17400 9380
Support 8230
16400 9050
As for STI the resistances and supports
are as follow:
Resistance: 2350, 2380, 2400
Support:
2300, 2230, 2150, 1960, 1885, 1850, 1830
Events To watch For The
Coming Week:
- The movement in Dow Jones
Industry and NASDAQ..
- The
movement in currencies, oil and commodities price.
-
The corporate earning results on last two Dow Industrials components,
Home Depot and Hewlett-Packard on Tuesday.
-
The economic data include Monday's May housing market index, Tuesday's
April housing start, Wednesday's minute of Fed last meeting, Thursday's
weekly jobless claims, Philadelphia economic leading indicator.
The following are two
possible wave counts on STI as at to-date:
- Preferred Count (60% probability)-- bullish count
My preferred count calling for a
top at 2502 (on 7/1/2000) as wave ((1)), it then follow by a two year
sell off on wave ((2)) to 1197 (on 28/9/2001). The index had then entered
into an impulsive wave ((3)) that ended at 3906. We are now in the
development of wave ((4)), of which we expect it to be a big triangle
formation that take about one to two years to complete. The recent sell
down is the first leg of wave ((4)), which will take a form of a-b-c and
reaches the potential target of 2770, as the wave (a) of ((4)). The
index will then continue to develop the (a)-(b)-(c)-(d)-(e) triangle
formation.
- Alternate Count (40% probability)--
bearish count
My alternate count calling
for a top at 2502 (on 7/1/2000) as wave ((1)), it then follow by a two
year sell off on wave ((2)) to 1197 (on 28/9/2001). The index had then entered
into an impulsive wave ((3)) that ended at 2666 in May 2006. The index had
then entered into wave ((5)) that ended on 3906 in October'07. We are
now in the downtrend bear market, which will last for a few years!
Although this count remains as the least chance as compare to my
preferred count. If the index breaks below 2776 convincingly on very
high volume, the odd on bear market will significantly increase.
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